Need to tackle all parts of reform

12 Apr, 2019 - 00:04 0 Views
Need to tackle all parts of reform Finance and Economic Development Minister Professor Mthuli Ncube

eBusiness Weekly

Finance and Economic Development Minister Professor Mthuli Ncube is in Washington for the Spring Meetings of International Monetary Fund and the World Bank to what amounts to discussing Zimbabwe’s report card on the progress it is making on financial and economic reforms.

The progress in these two areas has been substantial as the Transitional Stabilisation Programme has been implemented, and often implemented faster than some intended, in both fiscal and monetary policies with strong political backing for both despite the deep bites the austerity policy has made in many lives.

But even with a perfect score this will not result in any opening of access to these two institutions. What amounts to an American veto through its huge voting power will prevent that regardless of the other targets, such as debt clearance, that Zimbabwe still has to meet although planning in that area is in progress and would normally start negotiations on how Zimbabwe can benefit more from its memberships of the international financial institutions.

But that should not stop Zimbabwe from continuing with what amounts to sound economics to lay the necessary foundation for a growing economy. Our programmes are not in place to make the IMF or World Bank happy; they are there to make us happy as we move swiftly to end the era of low or non-existent economic growth and wild swings that have almost destroyed our economy on several occasions.

So we would agree with Prof Ncube that the Government has made significant progress in core economic areas. But progress in other areas has not been so impressive.

Corruption is one case. The right noises have been made. Some high profile arrests have been made. There are a number of people on bail. But so far the actual trial process has been remarkably slow in getting off the ground. Admittedly defence lawyers can fight hard and the law that is applicable is the law and the processes in place when the alleged breaches took place, not what is now in place. Evidence of actual bribery is almost impossible to prove, since this is done in private and payments are laundered thoroughly. We assume this is why new procedures involving declaration of assets and the like are being put in place, to help the next generation of prosecutors.

And some reprehensible and economically damaging behaviour is not even a crime. Zimbabwe has suffered badly from cartel-like behaviour in both the State and private sectors, people scratching each other’s back, exchanging favours, making deals. In the State sectors the charge of abuse of office has become the most used, but legal experts have noted that you cannot constitutionally use an over-loose definition and that a tighter definition will lead to loopholes that a decent defence lawyer can convert into triumphal archways. The courts have already suggested that in some cases civil remedies rather than criminal remedies may have to be sought.

Before the private sector starts polishing its haloes, it needs to examine its dirty laundry and some is quite filthy. There are anecdotal reports of large shareholders or senior managers, or both, gaining benefits or being invited into schemes that few would regard as ethical. Possibly no crime is committed but again minority shareholders or even customers might have a strong case in a civil suit. There are now international standards of good corporate governance, but until these are enforced there will continue to be dark corridors in Zimbabwe’s private sector.

In both private and public life a great deal more transparency is required. The Government is starting to open its windows, the Zimbabwe Stock Exchange is trying to move more best practice into the dealings of quoted companies, although a surprising amount of information can still be hidden in ambiguous footnotes, but large unquoted concerns, including partial subsidiaries of quoted companies, can escape any sort of light, let alone a bright light.

Because of the small size of the Zimbabwean economy competition is not nearly as strong as it could be, with a very small group of men (unfortunately at this level there do not appear to be women) controlling large sectors directly or indirectly. The Government does have a commission to prevent monopolies but there are many ways round the rules.

For example a large firm may be prevented from buying out a competitor, or forced to limit its shareholding in a competitor. But there is little to stop a major shareholder in that large firm from becoming a major shareholder in the target firm as well, creating a quasi-monopoly. And this is happening in Zimbabwe.

We need more systems in place that encourage competition and encourage those exceptionally astute business people, who we want and need, to grow their business empires and fortunes by creating new enterprises and new markets rather than by acquisition and buying out competitors. The one process creates new wealth and new jobs; the other just keeps what is there but narrows competition, narrows ownership and, quite often through rationalisation, cuts jobs. We have both types and need to convert the second element to emulate the first.

The new monetary policies, with the emphasis on market forces, will on balance help competition, by making it easier for new entrants or smaller older concerns, to gain access to needed resources, but market forces can also be manipulated and the authorities need to be aware of those dangers.

When markets are tightly managed, opening new businesses is difficult, and decisions are made by a tiny group on who will benefit then doors open to corruption, to abuse of office and to crony capitalism. So besides opening markets we also have to make more progress more swiftly on the fourth plank of the reform policies, ease of doing business. Significant progress has already been made. But we still have a long haul until were are fully compliant with the best global practice, or are even as good as most of our neighbours who switched from antiquated licence regimes decades ago when they started their reforms.

In other words the report card on the first eight months of the Second Republic is the sort of mixture of grades that can be expected when there are so many things to do. We have some As where we have forged ahead. We have some Bs where we have made progress but need more effort. And regrettably we have some Cs, but probably with the comment that we know what we need to do but simply have to do it, the “must try harder” comment.

Draining a swamp is not an instant process when there are so many inflows of dirty water and silt. But it can be done, and we need to be very open with each other about where we are winning and where we need to push harder. Plus, of course, we are already finding out that when you clean up one mess you find it was hiding another festering pool and that now has to be tackled.

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